D. Dowd Muska


State Governments Finally Get Serious

December 01, 2011

Budget wonks will remember 2011 as the year state governments acquiesced to the Great Recession’s fiscal realities.

Three years after the arrival of hard times, governors, legislators, and revenucrats ran out of options. They continued to expect a rapid economic turnaround, and as always, hoped for more money from the D.C. cash machine. But assumptions and pipe dreams were all that was left. Reserve funds? Drained. The Obama administration’s “stimulus” largesse had slowed to a trickle. Further bonding for unemployment payments and operating expenses was risky.

So actual cuts, not just stingier-than-desired increases in expenditures, took hold this year. The rollbacks weren’t what they need to be, especially given the huge unfunded liabilities most states face. But a marquee stat suggests that the restraint is real: The National Governors Association and National Association of State Budget Officers report that 29 states “have lower general fund spending” in the current fiscal year -- which ends June 30, 2012 -- than “the pre-recession levels of fiscal 2008.”

Some of the moves toward right-sizing were on the thin side:

• California’s solons gave up their subsidized vehicles, saving $285 per month, per pol. Taxpayers seem cool with yanking the rides. “Not very many people have their employers give them cars,” budget watchdog Robert Stern told The Sacramento Bee, “and these are, after all, our representatives and they really shouldn’t be getting perks that very few people get.”

• In April, the Texas Department of Criminal Justice eliminated weekend lunches for the cons under its care. The prison system also replaced carton milk with powdered milk and ditched hamburger and hot-dog buns for slices of bread. One legislator fails to feel sympathy for complainers. “If they don’t like the menu,” quipped State Senator John Whitmire, “don’t come there in the first place.”

• Republicans in New York’s Senate downsized their chamber. Jimmy Vielkind, a reporter with the (Albany) Times Union, enumerated the changes: “The payroll had 1,132 people as of [October], down from a high of 1,503 in July 2010. Regional offices in Buffalo, Rochester, Syracuse, Long Island and Albany are all closed, and six departments have been consolidated into three.”

• New Mexico capped the annual value of the tax credits it showers on film and television productions at $50 million. Michigan limited its giveaways to $25 million. Washington let its program expire. (It’s not the end of states’ sleazy, absurdly generous giveaways to a highly profitable industry, but it’s a start.)

Yet fiscal conservatives probed major cost drivers in 2011, too, and frequently scored wins. Wisconsin soaked up the bulk of the legacy media’s coverage of the compensation disparity between government and private-sector employees, but less visibly, other states stepped forward. Summer saw the passage of higher worker contributions for retirement and healthcare in New Jersey. As a “public” radio reporter put it, Rhode Island tackled its pension-driven budget dilemma “by hiking the retirement age, freezing cost of living adjustments, and moving nearly half of current state workers’ contributions into a 401(k)-style plan.”

There was also good news on welfare. In a November analysis, the far-left Center on Budget and Policy Priorities wailed, “California cut [Temporary Assistance to Needy Families] benefits by 8 percent, New Mexico and Washington by 15 percent, and South Carolina by 20 percent, in nominal terms. (The cuts in inflation-adjusted dollars were still larger.)” In July, Arizona stopped Medicaid coverage for adults without children. “Michigan can no longer afford to provide lifetime assistance,” a social-welfare bureaucrat told The New York Times, explaining that thousands of her state’s cash-handout recipients had been on the rolls for over a decade.

State colleges and universities have long been sacrosanct -- rewarded with endless revenue, and free from oversight and accountability. That may be changing. In October, Florida’s chief executive penned a blunt letter that asked inconvenient questions of the Sunshine State’s university presidents. “Many … graduates are unable to find jobs in their field of study,” wrote Governor Rick Scott, “and many employers are concerned that … graduates are not equipped with the appropriate writing skills, critical thinking skills and technical expertise needed to succeed.” Earlier in the year, Governor Jay Nixon proposed that subsidies to Missouri’s higher-ed-industrial complex be linked to metrics such as completion rates and graduates’ performance on professional-certification tests.

Fixing state government -- getting it to stop doing the things it shouldn’t, and start doing the things it should, affordably -- is sure to be a lengthy conflict. Optimists can credibly argue that the battle has finally begun.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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